OECD Harmful Tax Competition initiative under threat.
The EU's decision to allow three of its members an opt out over tax information exchanges has angered the juruisdictions that feel bullied into accepting the OECD's demands in order to escape a blacklisting under the Harmful Tax Competition Initiative.
Over 40 countries were listed as operating tax systems that gave them unfair advantage over OECD members. Many signed up to a series of pledges required by the OECD under its initiative, led by a UK treasury official.
Now the countries are angered and say that they were prejudiced and they are the victims of unfair tax treatment. They are threatening to revoke their agreement to the OECDs demands.
In a series of decisions (some of which have been previously reported in World Money Laundering Report: Online ), the EU released some countries of the obligations demanded by the larger countries in Europe. Some are in the EU and some are close neighbours: on 22nd January 2003, the EU decided that Austria, Belgium and Luxembourg will not be required to exchange information on tax matters. These countries can adopt an option, that is apply a withholding tax on savings held by residents of other member states. There is no sunset provision on this arrangement.
Switzerland is not an EU member but is a member of the OECD, yet the Council decided that it could apply the same rates of retention and withholding tax as Belgium, Luxembourg and Austria (although it did, as reported previously, enter into an agreement with the USA for information exchange).
Later, the EU agreed that it should enter into similar agreements with Liechtenstein, Monaco, Andorra and San Marino, also near neighbours and heavily criticised by various government and inter-governmental groups.
Those countries outside the favoured circle are hopping mad. "We were conned" they say. First out of the box is Antigua and Barbuda which has told the OECD it can forget any hope of co-operation until it stops its hypocrisy. The little offshore centre has told the OECD that it wants to know what is going on, and to see a full and fair strategy, before it will even hold any more meetings with the OECD.
It will not be the last: there is a likelihood that others will revoke their consent to the widely disliked plan for tax harmonisation.
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